Jeremy Allaire: From Brightcove to BitcoinNovember 1, 2013: 1:16 PM ET
Why Brightcove's founder and former CEO is launching a Bitcoin payment platform for merchants.
FORTUNE -- Serial entrepreneur Jeremy Allaire yesterday announced the launch of Circle, a Boston-based developer of digital currency acceptance tools for merchants. He also disclosed that the company has raised $9 million of Series A funding from Accel Partners and General Catalyst, both of whom helped Allaire create Brightcove (BCOV) back in 2004.
So we took some time to speak with Allaire about the new company, and the broader future of digital currency. What follows is an edited transcript of our conversation:
FORTUNE: Is this new company why you stepped down as CEO of Brightcove back in January?
ALLAIRE: No, not at all. I really didn't have any plans to start another company. I thought it would be nice to relax a bit or do some investing. But I had been familiar with the digital currency space for a year or so, and really after I stepped off into the chairman role I began to get very interested in the subject and problem space once I had more time to think about it, so in the spring I decided to start Circle."
There are some other VC-backed startups working on Bitcoin acceptance solutions for merchants. How will your product differ?
Certainly there are some conceptual similarities to other products out there. But, stepping back, my impression on the whole is that this is a very young market, like pre-Web in some ways. So while there are some business projects out there going after some of the same territory, the market is still very wide open. We're also taking a somewhat different approach to problems on the consumer and merchant side of things, which we'll be talking about more later.
When you look at digital currency, and Bitcoin specifically, at the core is utility value. It's a system to instantly transmit money and to nearly instantly confirm and process those transactions. And you can do all of that at no cost. To drive mainstream adoption you need to take that technological innovation and apply to from a merchants perspective of reducing costs and fraud risks. As more and more businesses offer it as a payment option, that will drive more consumer interest.
But consumers need more than just the option, right? Don't they need incentives to change behavior?
In some cases you're already seeing businesses say, 'If you pay with Bitcoin, we're going to give you a discount.' We think that's viable, promoting higher profit margins. Merchants are going to want to promote it because of the instant settlement and diminished fraud risks. Some of that will come via discounts or rewards or some other method, but I think they'll promote it nonetheless.
Also, on the consumer side, there are a number of fundamental benefits beyond possible economic advantage. One is that it provides consumers with greater privacy and security. Every time you make a credit card or debit card transaction, you're effectively giving the counterparty keys to you bank account. And we know that there are real subsequent issues around identity theft and fraud.
Of course, cash also takes care of that for those who are particularly worried...
True, but because this is all digital we can build compelling user experiences that allow for instantaneously touchless payments, for both person-to-person payments and person-to-merchant payments. Before email we could send faxes and letters, but then something new and better came along that became indispensible to society. In 10 years I think we'll look back and say we can't believe we lived in a world with enormous transaction fees and all these security risks. That we couldn't digitally send money to anyone anywhere in the world.
You can do some of that with existing mobile payment apps like Square, right?
Yes, but you still have the issue of the transmission of the keys. And of long settlement times that delays when businesses can actually access the money.
You mentioned 'touchless payments.' One startup that seems to be looking at that is Clinkle, which happens to also have raised money from Jim Breyer and Accel. Have you talked to them, or looked at it at all?
No, I'm not too familiar with what they're doing.
Can a company like yours be successful when Bitcoin values remain so volatile? Cash may be analog, but it generally maintains its value day-to-day.
I think it's a very important issue that needs to get settled. When you look at the existing currency markets you see large-scale government and institutional market makers. Bitcoin is very low volume in terms of trades, and therefore has a higher degree of volatility and lower liquidity. But I think most of that is a byproduct of it being a young market, and think there are tremendous economic opportunities for large institutions, or even government players, to participate.
When will we see Circle at the local store?
We have not announced yet when we're going to launch the product.
You've successfully launched two other companies, but neither had to deal much with government regulation, at either the federal or state levels. Here you've got both. Has it been an education?
Absolutely. One of the reasons I raised $9 million in a Series A is that when you're starting a regulated financial services business, it requires a significant investment to become compliant. We've surrounded ourselves with excellent outside advisors and the first key executive hire, after our CPO, was our general counsel and chief compliance officer, who has a couple of decades working with public banking companies. I take it very seriously.
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